SAT sets aside Sebi order in a fraudulent trading case

In February 2013, the regulator had slapped a penalty of Rs 4 lakh on Kapil Chatrabhuj Bhuptani for allegedly indulging in synchronised deals in the firm's shares

The Securities Appellate Tribunal (SAT) today set aside market regulator Sebi's order against an individual in a case related to fraudulent trading in shares of Era Infra Engineering.

 

In February 2013, Securities and Exchange Board of India (Sebi) had slapped a penalty of Rs 4 lakh on Kapil Chatrabhuj Bhuptani for allegedly indulging in synchronised deals in the firm's shares that led to creation of artificial volumes.

 

In its order, SAT noted that synchronised trading "is an accepted and by now well settled position that such trading in itself would not tantamount to any wrongdoing".

 

"It (synchronised trading) is objectionable only if it is illegitimate and is the outcome of a mischievous meeting of minds among certain parties which may with or without an element of mens rea as such," SAT said.

 

Accordingly SAT has "set aside the impugned order".

 

SAT observed that Sebi's order against Bhuptani does not state "cogent or convincing or even circumstantial evidence" that the individual was involved with the group of brokers or other clients in manipulating Era's scrip with a view to destabilise the equilibrium of the market.

 

"...In our considered opinion simple trading by the appellant in a particular scrip without any proved nexus between trades with the other so called group of brokers and clients is not per se punishable," SAT said.

 

A Sebi inquiry had found that Bhuptani had significantly traded, along with a group of its clients and few brokers, in the scrip of Era at least on 64 days out of total 170 days and was involved in synchronised trading.

 

SAT noted that Bhuptani share in the total trading was "insignificant" and "does not seem to indicate any prior meeting of minds as alleged by the respondent (Sebi)".